Consolidating Rating and Underwriting to Compete in the Modern Insurance Market

By Nicole Bruns, Product Marketing Analyst, Oracle Insurance

Insurance companies, emerging from the events of the past year, are focused like never before on the pursuit of profitable new business. In this quest, many are finding that they must rethink their IT strategies to support new business realities and requirements. One strategic area that insurers should re-examine is rating and underwriting. A consolidated approach to rating and underwriting supports the need for greater agility and accelerated speed-to-market, while driving down IT costs.The average insurance enterprise runs an array of IT systems, including policy administration, Web quoting and comparative quoting systems. Each system may have its own rating engine, which results in multiple instances of rating logic and constrains overall operational efficiency and performance. Insurers face the difficulty of maintaining multiple systems, which require multiple levels of IT expertise. In addition, data and rate inaccuracies are inevitable in a multiple rating engine environment, which requires users to manually update information across each system.

Insurers can eliminate these technological constraints by implementing a single rating engine, one that is Web-based and rules-driven. By adopting a single rating engine that integrates with multiple enterprise systems, such as agent portals and policy administration systems, insurers can increase speed-to-market, enhance pricing accuracy and risk management, reduce IT costs and gain the flexibility required to meet changing business and industry needs.

Serving More Markets More Quickly Getting rates into a rating engine historically has been a cumbersome process for insurers. Actuaries research and calculate the risk and pass this information onto the pricing team, which attaches a dollar figure. Business analysts then use this information to write out rating specifications and IT staff code and test the rates. This process grows increasingly complex with multiple rating engines, which require separate configuration and testing. By consolidating onto a single rating engine, and also empowering business users to create, manage and execute rates, insurers can greatly accelerate this process.

In a consolidated environment, business users only need to input rates one time after determining the price - eliminating IT team involvement, duplicate data entry and coding and testing requirements. The end result is faster speed-to-market for new products. If a rate changes, business users can quickly update the information and the system accurately reflects the new price across all distribution channels. Integrating a single rating engine with the insurer's Web portal also enables agents to more easily access accurate rates, bolstering insurers' efforts to expand into new distribution channels or markets. Reducing Risk and Costs Both a consolidated and an integrated approach to rating supports expanded risk analysis capabilities. By integrating all systems (whether an insurer's agent portal, customer portal or policy administration system) to a single rating engine, each system receives the same results every time. A single rating engine ensures accurate rates across every channel by supporting a single source of rating truth.

Additionally, actuaries, product managers, business analysts and other staff can also use rates in the consolidated system to run "what-if" scenarios on an entire book of business to see how rate changes may affect underwriting profitability. Combined with scenario testing, insurers can leverage infinite rating tiers to profitably underwrite business that they may have previously turned away. A Pennsylvania-based regional property and casualty insurer, for example, had struggled to execute rates from both its agent Web portal rating engine and a rating engine embedded in its legacy policy administration system. After consolidating onto a single rating engine, the carrier was able to write business previously considered too risky by calculating a much broader range of factors and tiers.

Adopting a consolidated rating approach will increase rating accuracy for insurers and reduce IT costs. For example, if an insurer has three rating engines for multiple channels or lines of business, it could be processing Web quotes and final policy quotes from separate engines. Not only does this lend itself to accuracy issues, but running multiple engines requires redundant hardware. By consolidating onto a single rating engine, the insurer can reduce data redundancy, improve accuracy and minimize hardware requirements, as well as the associated IT maintenance and management costs.

Insurers also can more effectively respond to future market and regulatory changes by migrating to a single rating engine. Consolidated rating provides insurers with enterprise-wide insight to assess which lines of business are most profitable, as well as how to improve the profitability of lagging lines of business. Implementing a single rating engine also enables insurers to quickly adjust to comply with new regulatory requirements as they come into effect.

Consolidating onto a single rating engine enables the agility and efficiency that insurers require to effectively compete in the modern insurance market. With a streamlined rating approach, insurers can rapidly adapt to market changes and capitalize on new business opportunities, while reducing IT costs to optimize profits.

About the Author: Nicole Bruns is a product marketing analyst with Oracle Insurance, where she is responsible for rating and underwriting applications, business intelligence, distribution management and other offerings for the Property & Casualty market. Contact: [email protected].Consolidating onto a single rating engine enables the agility and efficiency that insurers require to effectively compete in the modern insurance market. With a streamlined rating approach, insurers can rapidly adapt to market changes and capitalize on new business opportunities, while reducing IT costs to optimize profits.